Japan Market Analysis – Key Insights for 2022

Posted By Jim Kersey

While expanding into new markets can seem daunting at the best of times, recent geopolitical events and the lasting effects of Covid-19 have made businesses even more cautious about expanding to places like Japan.

Yet, we still believe the greatest barriers to entry can often be overcome with diligent planning, guidance from local experts, and targeted market analysis. On paper, Japan is still an incredibly attractive location for foreign businesses, and for those who commit to the process, the practical rewards can be substantial.

For companies and investors wanting a cursory overview of the local market, here’s our Japan market analysis roundup for 2022

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Japan Market Analysis — 2022 Summary

  • Japan is still the third largest economy in the world after the United States and China, as well as the fourth largest importer of U.S. products.
  • The country is home to one of the biggest and fastest growing ecommerce sectors, connecting both domestic and foreign brands with millions of Japanese consumers hungry for all kinds of products and technologies.
  • Japan’s rapidly aging and declining population continues to present both market challenges and opportunities, shaping consumer needs and demands in fields such as healthcare, leisure, technology, pharmaceuticals, and real estate.
  • While the consumer economy is large and sophisticated — with a high income per capita — consumer groups can be extremely demanding with tastes that vary substantially to Western consumers and high expectations for quality and customer service.
  • The nation has a robust network of strong local companies who tend to rally against new competitors. Foreign businesses must be prepared for such competition.
  • Various import regulations, permissions, certifications, procedures, and local government authorities make Japan extremely bureaucratic.
  • Like many other nations, Japan has suffered economically as a result of the pandemic and has felt the impact of disrupted global supply chains as well as weaker demand from China — its second largest export market.

Learn How to Start a Business In Japan in 2022

Is the Japanese Market Reopening in 2022?

Tokyo airport representing Japan’s closed borders for Japan market analysis 2022

Following the Covid-19 pandemic, Japan has been slow to open its borders to the world compared to some countries. While it has allowed foreign business travelers and students to continue entering the country, tourists visiting Japan must be from a ‘blue list’ country and sponsored by an approved Japanese travel agency.

Also, the process of acquiring permission for most work trips requires support from a local sponsor and a good deal of lead time to ensure visas are processed in time.

This has made it harder for businesses who rely on or facilitate tourism in a country that was once one of the most visited tourist destinations in the world. And it has also made it more difficult for foreign business owners planning reconnaissance trips or face-to-face meetings with future business partners.

That said, many are hopeful about Japan reducing restrictions even further and some investors have already started to focus on stocks that might benefit from the return of high levels of tourism.

Understanding Japanese Consumers in 2022

At first glance, Japanese consumer trends can seem puzzling for brands and marketers familiar with Western preferences and behaviors. For instance, the adoption of certain trends and foreign brands can seem quite unpredictable, with certain less-known foreign brands performing incredibly well here, and other big-name global brands failing to build any traction at all.

Ultimately, the Japanese consumer market must be treated as different in that new research and testing should always be done before any large scale launch of products or services is carried out. Businesses must also avoid relying on outdated models or assumptions about Japanese demographics.

However, there are a few concepts that can help you understand some of the major differences that exist between Western users/customers and Japanese ones — just remember that nothing beats targeted Japan market analysis focused on your niche or core customer groups.

Japanese Consumer Trends in 2022

  • In Japan, where collectivist thinking is prevalent, consumers are less concerned with being different than being accepted by their peers. By presenting your product or brand as too unique or unusual, you could be deterring potential customers.
  • Quality and durability is incredibly important. There is a tendency to buy fewer items overall that are much higher in quality (and often more expensive). Reasons for this may be cultural or simply due to the lack of storage space that exists in most Japanese households.
  • Japanese consumers are highly risk averse and distrustful of organizations, according to indicators like the Edelman Trust Barometer. This means that establishing that initial connection with them is even more important, building a strong sense of your trust and reliability early on.
  • Consumers often prefer more information than less, to the extent that displaying minimal amounts of information in product descriptions, advertisements or on packaging can seem too “mysterious” or untrustworthy.

Behavioral Changes Prompted by Covid-19

The pandemic still continues to dictate certain realities in the Japanese market in 2022.

  • Many still don’t feel comfortable eating or shopping in public places, according to research from GWI — forcing some to spend more time at home and perform their essential shopping tasks online.
  • Social media usage has increased overall as many look to various platforms as a source of news and a way to connect with others.
  • More seniors have taken to social media, compelling many brands to target older demographics through platforms like Facebook in a way they weren’t able to before.

Want to Know More About the Japanese Consumer Mindset?

Key Sectors in Japan

Gaming station representing Japan’s booming gaming sector for Japan market analysis 2022

Japan is a leader in several sectors, including consumer electronics; engineering; aviation; advanced technology; research and development; and car manufacturing.

Investors are also paying close to specific markets that are likely to benefit from the nation’s rapidly aging population, such as healthcare and life sciences.

Gaming After only China and the US, Japan has the third largest games market estimated at USD$ 20 billion according to Newzoo.
Retail Japan is the third-largest e-commerce market globally where individuals have high personal wealth. Much of the population enjoys shopping on many of the nation’s popular ecommerce platforms, such as Rakuten and Amazon Japan.
Automotive Japan is still the world’s biggest producer of cars and home to the largest market for automotive parts, technology, and expertise.
Biotechnology and healthcare In line with its aging population and the maturity of its technology sector, Japan has invested heavily in healthcare-related technologies in recent years. According to Santander’s foreign investment profile for Japan, medical equipment, pharmaceutical products, biotechnology, safety equipment, and dietary supplements are among the key areas of opportunity within the national economy.
Information Technology Modern and sophisticated technology infrastructure, widespread internet penetration, a formidable gaming sector, and a love for digital media contribute to Japan’s robust IT sector.
Advanced Manufacturing & Robotics Japan has long been a strong global player in robotics and advanced manufacturing.
Electronics A huge proportion of the world’s high-tech products are made in Japan, which is home to many of the world’s largest tech companies.
Tourism Pre-Covid-19, Japan was one of the most visited destinations on the planet by tourists, benefiting several industries serving the once regular influx of visitors to the nation’s major tourist hubs such as Tokyo and Kyoto.
Renewable Energy & Climate Tech Japan has set ambitious sustainability targets, such as achieving a net-zero society by 2050 and doubling the proportion of renewable energy by 2030. This has resulted in significant investments in the Environment, Social and Governance (ESG) sector as well as Green Tech.
Fintech The government has invested heavily in promoting Tokyo as a fintech hub worldwide and the fintech sector is set to grow 51% annually to US$11 billion through the end of 2022, according to FinCity.Tokyo.

Forecasted Ecommerce Growth in Japan (2022-2025)

Revenue is expected to show an annual growth rate of 14.70% between 2022 and 2025, resulting in a projected market volume of US$324.60bn by 2025, according to Statista.

Projected Revenue Generated By Year

Year Revenue in billion USD (US$)
2017 94.23
2018 104.60
2019 115.20
2020 142.60
2021 188.00
2022 215.10
2023 246.40
2024 282.60
2025 324.60

Source: Statista

What Do Japanese Consumers Like Buying Online?

Product Type % of Shoppers
Groceries 31
Electronics 24
Beauty & personal care 19
Clothing/shoes 18
Household products 14
Luxury 12
Alcohol 10
Home & furniture 10
Medicine & healthcare 9
Financial products 9

Source: GWI

Learn More About Ecommerce in Japan

Foreign Investment Climate in 2022

Startup city Fukuoka as highlight location for Japan market analysis 2022

Japan has for several years been actively encouraging foreign investment. Several government policies have been specifically designed to attract foreign business and many once-complicated administrative processes have been purposefully streamlined to make it easier for non-Japanese speakers.

A number of schemes have also been developed to support startups. In 2021, Japan invested over US$8 billion into new businesses — the largest amount in Japan’s history. Together with incubators, loans, and newly recognized “start-up cities” like Fukouka that offer a more start-up friendly environment for new businesses, a healthy startup ecosystem has been developing.

That said, unique cultural differences and the extent of the language barrier for Western businesses do make getting started here fairly complicated. Any investment or market entry approach is no doubt strengthened with the support of a local partner, advisor or consultant who can offer local insight.

Final Considerations

High-quality Western products and appealing foreign brands still perform well in Japan when backed by the right market entry strategy and a clear understanding of current market threats and opportunities. Below are a few final considerations worth keeping in mind as you perform your own Japan market entry analysis and build a business plan for the Japanese market.

Brand and Product Localization Localization is a necessity for any business hoping to build credibility in the Japanese market, and cater to the complex demands of local consumers. Understanding how your brand and products will be perceived by your new audience is the first step to adapting your messaging to better suit local preferences.
Timing Consumers and corporations can be incredibly loyal to their existing brands and suppliers. This makes first-mover status incredibly important in many respects, but success is also possible as a late entrant as long as you adapt your entry strategy to match your strengths as a brand and learn from the success or failures of your competitors.
Bilingual Capabilities If you’re interacting with Japanese consumers directly in any way, it’s necessary that your team has good Japanese language abilities or you are able to rely on partners to help you in this are. Equally, completing various applications and registrations is infinitely easier with native speakers on your side.
High-Quality Expectations Stringent regulations and bureaucratic practices combined with excessive quality expectations set by industry governing bodies make it important to refine your products and services so they’re 100% fit for the market.
A Preference for Japanese Products Despite what you may have heard, consumers won’t love your brand just because it’s foreign or different. In fact, the opposite is often true. A love of Japanese products among consumers and an unwillingness to shop from brands they don’t know can make it harder than predicted for some companies to build a presence in Japan initially.

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